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Former Assistant Treasurer Out on Bail in Orange County Debacle

May 18, 1995

SANTA ANA, Calif. (AP) _ Former Orange County Assistant Treasurer Matthew R. Raabe was bailed out of jail today by his mother to begin preparing his defense to six felonies related to the county’s financial fiasco.

Raabe was released on $200,000 bail, a day after his court-appointed lawyer argued that the original $500,000 bail _ twice the standard amount for a murder defendant _ was ridiculously high.

Superior Court Judge David Carter appointed Gary M. Pohlson to the case after declaring Raabe too destitute to pay for his defense. Raabe is accused of deceiving investors in the county treasury and buyers of county bonds.

In other developments:

_ Companies that manage 33 funds holding $24.6 billion of California municipal bonds warned Gov. Pete Wilson they might curtail such purchases if the state doesn’t help ensure that Orange County pays more than $1 billion it owes this summer. The action could drive up borrowing costs for all California governments and agencies. Wilson spokesman Sean Walsh said the state can’t afford to play ``sugar daddy.″

_ The Democratic Central Committee of Orange County endorsed a ballot measure that would raise the sales tax by a half-cent, to 8.25 percent, despite objection to the proposal by the committee’s chairman. Proponents say the increase is needed to repay debt and maintain services at an acceptable level, but it faces an uphill battle with the county’s famously conservative and angered voters.

Carter postponed Raabe’s arraignment until June 13 to allow grand jury testimony to be transcribed and Pohlson to review it.

Raabe, 39, faces charges that include deceiving investors, shifting other people’s money into a county-controlled account and falsifying the books to cover up the crimes.

Threatened with arrest, Raabe surrendered Tuesday and was booked into jail. He describes himself as a subordinate who followed the orders of former Treasurer Robert L. Citron.

He has portrayed himself as someone who realized too late that Orange County was skidding toward financial disaster as a result of Citron’s misplaced bets on lower interest rates that collapsed the county’s investment pool and ushered in bankruptcy.

Raabe contends he tried to warn others in the county government.

Investors, however, have described him as a cheerleader for Citron who misled them about the risks the fund was running in order to pay high returns.

The county became the biggest local government ever to seek bankruptcy protection on Dec. 6, 1994, with losses of $1.7 billion to the treasury where it and nearly 200 other government bodies had invested $7.5 billion.

The Orange County district attorney’s office had earlier offered Raabe the same take it-or-leave-it deal that Citron, 70, decided to accept on April 27.

Citron pleaded guilty to the six counts and remains free on $25,000 bail while cooperating with the investigation.

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